Benchmarking and Budgeting

For many companies, reviewing and managing their financial results is simply an exercise of looking at the P&L and balance sheet after the close of a month. Management then makes a brief determination as to the results usually based on how current month compares with the prior month close, or the same period of the prior year. In essence, the company is informally benchmarking and budgeting against its own actual results. This style of financial management does not take into consideration how the company’s results compare with its industry or competitors, or even with the goals of management and shareholders. Establishing and utilizing benchmarks and budgets to gauge and improve financial results should be a part of every company’s best practices.

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